HANOI, Vietnam -- Less than five years after Vietnam became the hot new frontier for foreign investment, many expatriate business people are packing up and leaving in frustration over the slow pace of economic reform and their inability to make money.

No U.S. corporation has turned a profit here since the U.S. trade embargo was lifted in 1994, according to U.S. diplomats. With investor confidence ebbing, along with the buzz that made Vietnam the place to be, the foreign exodus is an unsettling portent for a long-isolated country that needs capital and, publicly at least, is committed to finding a place in the global marketplace.

"I did not feel I could, in good faith, encourage others to invest their money in a country as complicated and risky as Vietnam," said Kim Odhner, a U.S. entrepreneur who packed it in recently after three years. "I left feeling that Vietnam has to work out its own issues before it is fully ready to address the expectations of others."

There are no figures on how many of the about 20,000 foreign business people in Vietnam are leaving. But there are indicators: Enrollment in Ho Chi Minh City's International School, which caters to the children of expatriates, has dropped nearly 20 percent in the past year. Business sources said 182 representative offices have closed in Ho Chi Minh City, formerly known as Saigon. Of Hanoi's 1,002 luxury apartment units, which foreigners once waited months to rent, 481 stand empty. Office rents have dropped 60 percent.

The Sheraton Hotel in Hanoi was boarded up and abandoned two weeks before its scheduled opening this year; construction of the Marriott and Hyatt hotels in Ho Chi Minh City stopped in midstream.

In the first nine months of 1998 compared with the same time in 1997, direct foreign investment has dropped 46 percent, to $1.65 billion. This year, for the first time since opening its doors to the outside world, Vietnam will receive more in donor aid than in foreign investment -- a shortfall that reflects, in part, the economic problems of other Asian nations, which account for 72 percent of Vietnam's foreign investment.

Although many major players, such as Ford Motor Co., IBM Corp. and General Electric Co., have dug in for the long haul, gloom is pervasive in the business community.

Said one American who asked not to be identified: "I was convinced Vietnam was the place to be in the mid-'90s. Everything I've got, and more, is invested here. Whether I can hang in until there's a turn-around, I don't know."

Vietnamese officials are gravely concerned that the expatriate exodus is translating into the loss of much-needed foreign capital. They have promised to redouble efforts to improve the business climate, but their reforms have been so cautious and slow in coming that many investors are skeptical about Vietnam's commitment to a free-market economy.

The crux of the problem is that the Communist Party wants the perks, but not the risks or responsibilities, of such an economy. Old-guard members, shaped by a generation of war, distrust the motives of foreign investors.

They insist that foreign investors wanting to do business take on a Vietnamese partner. But the foreigners put up all the money and take 100 percent of the risk. The Vietnamese contribute only land, which they received free from the government.

As in many developing countries, civil servants in Vietnam don't make enough to survive -- even the prime minister's base salary is only $96 a month. That forces some government workers to seek secondary sources of income, chief of which can be the "toll at the bottleneck," as one investor euphemistically calls the bribes he pays to move applications along.

The nightmarish bureaucracy makes Vietnam the most stressful country in Asia for foreigners to work, according to a survey released in December in Hong Kong by Political and Economic Risk Consultancy.

Even Singapore's founding father, Lee Kuan Yew, is advising Vietnam to move decisively to improve the business climate and stem the departure of U.S. executives.

"You're treating the Americans like you did in the war," he recently told senior Vietnamese officials. "You invite them in and then you ambush them."